China's Monetary Policy Asymmetric Effect Study

Evidence from research shows that the effects of contractionary and expansionary monetary policy differ from each other significantly when coping with the overheated and recessionary economy, contractionary monetary policy slow the economy more than the expansionary monetary policy accelerate the economy. Economists call it"asymmetric effect of monetary policy". When we compared the effect of contractionary and expansionary monetary policy, we can found that when monetary policy was tight in 1993 and 1994, the economy slowed down quickly. Yet when monetary policy was easy in 1998, the economy did not response accordingly. Through the review of the monetary policy effect between the different business cycle, we present many questions: how the asymmetric effect is formed? Whether the overseas explanations can apply to china? These questions are the purposes of the research.The thesis has four chapters as follows: the summary and reviews of theories and empirical literature on asymmetric effect of monetary policy, the empirical analysis on the asymmetric effect using china's data, the explanation for empirical conclusion, and the further analysis.The first chapter reviews the theories and empirical literature on asymmetric effect of monetary policy. After reviewing the research history of asymmetric effect, we can find that there are four reasons to explain the existence of asymmetric effect, the asymmetric price adjustment, the credit constraints, the outlook changing, and two constraints (reserve requirements and capital requirements) theory. Compared with overseas research, domestic scholars began to study asymmetric effect after 2000, most of their research focused on empirical analysis and few of them gave thorough explanation for empirical conclusion.In the second chapter, the thesis analyzes asymmetric effect of...